Simpson v. City of Nacogdoches , 1912 Tex. App. LEXIS 1348 ( 1912 )

From the foregoing statement of the facts established upon the hearing in the court below, the bonds, the sale of which plaintiffs sought to have enjoined, were in fact sold and delivered before the application for temporary injunction was heard, and therefore no injunction against their sale could have been granted.

Upon this state of facts, if the validity of the bonds can be inquired into at all in this proceeding, to which the purchaser is not a party, said bonds having been duly approved and certified by the Attorney General and registered in the comptroller's office in accordance with articles 619, 620, 621, and 622 of the Revised Statutes, the only ground upon which their validity can be attacked is forgery or fraud, or that their issuance was contrary to the Constitution of this state. Article 625 of the Revised Statutes reads as follows: "Such bonds, after receiving the certificate of the Attorney General, and having been registered in the comptroller's office, as provided herein, shall thereafter be held, in every action, suit or proceeding in which their validity is or may be brought into question, prima facie valid and binding obligations. And in every action brought to enforce collection of such bonds the certificate of the Attorney General, or a certified copy thereof, shall be admitted and received in evidence of the validity of such bonds, together with the coupons thereto attached: Provided, the only defense which can be offered against the validity of said bonds shall be for forgery or fraud. But this article shall not be construed to give validity to any such bonds as may be issued in excess of the limit fixed by the Constitution, or contrary to its provisions, but all such bonds shall, to the extent of such excess, be held void." We think the purpose and intent of this statute is to make valid, in the hands of a purchaser, all municipal bonds that have been approved, certified, and registered in accordance with the provisions of the statute, unless such bonds are forgeries or were fraudulently issued, or issued contrary to the Constitution. We think it clear that, if no defense other than forgery or unconstitutionality can be urged against a suit brought to enforce a collection of such bonds by the purchaser, a suit brought by the taxpayers to have such bonds declared invalid can only be maintained upon one of the grounds before named.

It follows from this conclusion that the only ground of invalidity alleged by plaintiffs that it is necessary for us to consider is that, under the Constitution of this state, cities are not authorized to issue bonds for the purchase or construction of electric light plants. Plaintiffs contend that section 9, art. 8, of the Constitution, which authorizes the levy of taxes by cities for permanent improvements, does not authorize such levy for the purpose of acquiring an electric light plant. By the provisions of this section a tax is authorized "for the erection of public buildings, streets, sewers, waterworks, and other permanent improvements." It is urged that the erection and operation of an electric light plant is an enterprise so different from the erection of public buildings, streets, sewers, and waterworks that under the rule of ejusdem generis it cannot be regarded as included in the clause "other permanent improvements" used in said section of the Constitution. Prior to the amendment of the Constitution in 1890, when "waterworks" was added to the named improvements for which the tax might be levied, it was held that no tax could be levied by a city for the purpose of acquiring waterworks. Ellis v. City of Cleburne, 35 S.W. 499. Plaintiffs contend that, if a tax for the erection of waterworks was not authorized under the term "other permanent improvements," a fortiori an electric light plant cannot be held to be included in said term. We do not think this contention is sound. Waterworks and electric light plants are of the same general character of public utilities or improvements. Each is distinctly different from a public building or from streets or sewers; and, while waterworks might be held not ejusdem generis with public buildings, streets, and sewers, we think electric light plants bear that relation to waterworks.

If we did not feel constrained to hold that none of the other objections to the bonds could invalidate them under the provisions of the statute before quoted, we would not be inclined to hold that the submission to the voters as one proposition the question of issuing bonds for the purpose of "purchasing and constructing an electric light plant for said city" was improper or in any way affected the validity of the election or of the bonds issued as a result thereof. The proposition to purchase might have been submitted separately from the proposition to construct an electric light plant, but we do not think the council was required to submit separate propositions for the purpose of ascertaining the choice of the voters as to the method of acquiring the light plant. Under the proposition submitted, the voter who cast his vote in favor of the bonds must have understood that by so voting he left it to the judgment of the council whether the bonds should be used for purchasing or constructing a light plant, or for both purposes. We think this manner of submitting the question was permissible.

There is much force in the contention that the change in the redemption period from 5 years, as stated in the proposition submitted to the voters, to 10 years was such a material change as to render the bonds invalid. It is clear that an obligation payable in 40 years, and only redeemable after 10 years, is more onerous than one payable in 40 years and redeemable after 5 years. The difference in the amounts the debtor would be required to pay might be the interest upon the whole amount for 5 years, and would certainly be the interest for 5 years upon whatever amount he might be able to pay at the end of 5 years from the date of the bonds, less any interest that might be earned in that time by the fund out of which the payment would have been made. We do not think the contention that this change was immaterial and should not be regarded, because it was not necessary to state in the proposition submitted to the voters when the bonds were redeemable, is sound. Article 606 of the Revised Statutes provides that "the proposition to be submitted for the issuance of bonds shall distinctly specify the purpose for which the bonds are to be issued, the amount thereof, the time in which they are payable, and the rate of interest." It is true that this article does not in so many words require that the proposition shall specify the period of redemption, but it is not clear that such requirement is not included in the general term "the time in which they are payable." While in a technical sense the date upon which an obligation becomes payable is the date upon which payment can be enforced, it seems to us that the term "the time in which an obligation is payable," as used in the statute, might be properly construed to include both the redemption and maturity dates of the obligation. At any rate, there is no inhibition in the statute against including the redemption date in the proposition; and having so submitted the proposition, and the voters having voted in favor of bonds redeemable in 5 years, we do not think it was proper to change the redemption period to 10 years. The bonds issued are not the bonds authorized by the voters, but materially different therefrom, and, as before said, clearly more onerous. In the case of Skinner v. Santa Rosa,107 Cal. 472, 40 P. 745, 29 L.R.A. 512, the Supreme Court of that state, in discussing this question, say: "If the terms and conditions submitted to the electors may be departed from, and such election held to authorize the issuance of bonds under other terms and conditions, a door will be opened authorizing the common council to submit a proposition so favorable as to secure beyond question a favorable vote, then change the conditions as to rate or otherwise, even without any fraudulent purpose or intent, so that, if again submitted, an overwhelming defeat would result."

But, as we have before said, this defect in the bonds is not one that can now be urged against their validity; they having been approved and certified by the Attorney General and registered in the office of the comptroller, and being now in the hands of a purchaser from the city.

We are of opinion that the trial court did not err in refusing to grant the injunction prayed for by plaintiffs, except in so far as they sought to restrain the defendants "from using the funds or any part thereof derived from the sale of any part of said bonds for the payment of any debts contracted for bridges or other purposes before the issuance of said bonds or before the call for said election." We do not think the city authorities could legally use any of the funds derived from the sale of the bonds to pay any debts contracted by the city prior to the election at which the bonds were voted. The bonds were not voted for the purpose of paying any existing debts of the city, and the funds derived from their sale cannot be used for such purpose.

The judgment of the court below should be affirmed, except as to that portion refusing to enjoin the use of the funds for the purposes above stated, and that portion of the judgment should be reversed and judgment here rendered enjoining the defendants from using any of the funds derived from the sale of said bonds for the purposes stated, and it has been so ordered.

Affirmed in part. Reversed and rendered in part.